THE AUTHOR:
Zeyad Abouellail, Senior Legal Officer at Jus Mundi
Arbitration Aftermath with Zeyad Abouellail and Esen Aydın: Your trusted source for the latest post-award developments in the dynamic world of investor-State and commercial arbitration. Back with a fresh perspective, Zeyad focuses on cases involving States, ministries, and public entities, while Esen handles disputes between private parties. From settlements and compliance with awards to recognition, enforcement procedures, annulment, and beyond. Each week, we bring you global insights and updates to navigate this ever-evolving landscape.
Littop v. Ukraine
Svea Court of Appeal Upholds Award Rejecting Jurisdiction Over USD 6 Billion Claim Against Ukraine
SCC Case No. V 2015/092
Institution: SCC (SCC Arbitration Institute)
Tribunal: Julian D. M. Lew (President), L. Yves Fortier (Appointed by the claimants), Rodrigo Oreamuno (Appointed by the State)
Seat of arbitration: Stockholm, Sweden
On 31 January, the Svea Court of Appeal upheld an SCC Award that dismissed a USD 6 billion Energy Charter Treaty (1994) (“ECT“) claim brought by three Cypriot investors against Ukraine, albeit on different grounds from those reasoned by the arbitrators.
Background
In 2015, three Cypriot companies (“the investors”), ultimately controlled by Ukrainian oligarchs Igor Kolomoisky and Gennadly Bogolyubov, initiated arbitration against Ukraine. The investors held a 40% stake in Ukrnafta, Ukraine’s largest oil and gas producer. They claimed that Ukraine had breached the ECT through a series of measures, including the regulation of gas sales prices to Naftogaz and attempts to dismantle Ukrnafta’s corporate structure. The investors sought compensation of around USD 6 billion.
In a Final Award issued in February 2021, the tribunal declined jurisdiction over the investors’ claims, finding that:
- Two of the three claimants failed to prove ownership of the shares at the relevant time.
- The alleged investment in Ukraine was tainted by bribery and corruption and was in violation of international public policy.
- Ukraine validly invoked Article 17(1) of the ECT to deny the Claimants the benefits of Part III of the ECT.
The investors subsequently applied for the award to be set aside, while Ukraine sought modification of the tribunal’s award of costs.
Svea Court of Appeal Dismisses Investors’ Request to Set Aside Jurisdictional Award
In its judgment, the Svea Court of Appeal concurred with the tribunal’s finding that the investors had not made a qualifying investment under the ECT. However, the Court diverged from the tribunal’s conclusions on certain points.
The Court observed that the tribunal had erroneously interpreted Ukraine’s denial of benefits objection under Article 17(1) of the ECT as a matter of jurisdiction, rather than admissibility. Consequently, the Court determined that it lacked the authority to assess the tribunal’s interpretation of Article 17(1)’s requirements under Section 36 of the Swedish Arbitration Act.
With regard to the tribunal’s dismissal of the case on grounds of illegality, the Court found that the ECT does not contain any implicit legality requirement. Furthermore, it considered that neither Swedish public policy nor Swedish case law prohibits the examination of a civil case even where the relevant assets had their origin in a crime. The Court further observed that international public policy does not mandate the dismissal of a claim related to corruption. Instead, it was more probable that such allegations would be addressed during the merits stage of the proceedings. The Court also noted that the clean hands principle, upon which the tribunal relied, lacked sufficient international support to justify a dismissal of the claim on this basis.
Nevertheless, the Court opined that the investment did not constitute a protected investment under the ECT. The Court explained that Article 1(6) of the ECT “must be interpreted as requiring, inter alia, that an investment must involve some form of contribution, that it must be of a certain duration, that it must provide an opportunity to make a profit and that it involves the assumption of risk“.
On this basis, the court concluded that the investors had not paid consideration for their Ukrnafta shares.
Court Grants Ukraine’s Request for Modification of the Tribunal’s Costs Determination
On Ukraine’s request for modification of the tribunal’s costs order (that each party shall bear its own costs), the Court observed that the SCC Arbitration Rules 2010 provide for the costs-follow-the-event principle and accordingly rejected the investors’ argument that in investor-state arbitration, the parties should bear their own costs. The Court considered that, under Swedish law and the SCC Rules, the starting point is that the prevailing party shall receive compensation for its legal costs.
The Court assessed the procedural history of the arbitration and concluded that no circumstances justified departing from the costs-follow-the-event principle. It determined that Ukraine should be awarded the costs of the arbitration, with the exception of USD 100,000 in compensation to the investors due to Ukraine’s delays in document production. Consequently, the Court granted Ukraine USD 18.9 million in arbitration costs out of a total of USD 23 million.
Furthermore, the investors were ordered to pay Ukraine’s legal costs in the domestic proceedings.
In a press release, Ukraine’s Deputy Prime Minister for European and Euro-Atlantic Integration, Olga Stefanishyna, stated, “As a result of considering the plaintiffs’ claims, the arbitration tribunal agreed with Ukraine’s position regarding the tribunal’s lack of jurisdiction to consider this dispute, which was confirmed by the Svea Court of Appeal“.
Mercuria Energy v. Poland (II)
Poland Successful in Setting Aside Intra-EU ECT Award in Sweden
SCC Case No. V 2019/126
Institution: SCC (SCC Arbitration Institute)
Tribunal: Klaus M. Sachs (President), Juliet Blanch (Appointed by the claimant), Laurence Boisson de Chazournes (Appointed by the State)
Seat of arbitration: Stockholm, Sweden
In a recently published judgment of 23 December 2024, the Svea Court of Appeal set aside an intra-EU USD 33 million ECT award, deeming it to be incompatible with Swedish public policy.
Background
The dispute arose from a financial penalty imposed by the Polish Material Reserves Agency on Mercuria’s subsidiary, J&S Energy S.A. (JSE), in 2008. Although the penalty was overturned in 2009 by Polish administrative courts, the government failed to fully reimburse Mercuria. This led to the initiation of a first arbitration under the ECT at the SCC in 2008, which was dismissed on its merits in 2011.
Following unsuccessful attempts to obtain redress through Polish courts, Mercuria initiated a second ECT arbitration in 2019, seeking recovery of the outstanding penalty and accrued interest. In December 2022, the tribunal ruled in Mercuria’s favour, awarding approximately USD 33 million in damages plus interest and legal costs.
The tribunal rejected Poland’s argument that intra-EU disputes should not be arbitrated and that Mercuria had committed an abuse of process. The tribunal also dismissed Poland’s fork-in-the-road objection that Mercuria was pursuing identical claims in both arbitration and Polish courts. On the merits, the tribunal found Poland in breach of both the effective means and the fair and equitable treatment standards of the ECT, citing undue delays in proceedings, the ineffectiveness of local enforcement remedies, and the administrative authorities’ failure to maintain transparency and respect for procedural property (See our previous digest here).
While Poland sought to set aside the award at the seat in Stockholm, Mercuria initiated enforcement proceedings in the United States.
Svea Court of Appeal Finds Award Incompatible with Swedish and EU Law
In its judgment, the Svea Court of Appeal relied on the jurisprudence of the CJEU as established in the cases of Achmea, Komstroy and PL Holdings. It explained that the Swedish Supreme Court had previously confirmed this approach in the context of setting aside proceedings concerning intra-EU awards. The Court further clarified that intra-EU arbitration clauses are “incompatible with the fundamental rules and principles governing the legal order of the EU, and consequently, of Sweden“.
The Court thus found that upholding the award would be “manifestly incompatible with the public policy” of Sweden and set it aside pursuant to Section 33(1)(2) of the Swedish Arbitration Act.
Set Aside of the Award Not Contrary to the European Convention on Human Rights (ECHR)
Mercuria contended that the Svea Court should not adopt the CJEU’s interpretation of Article 26 of the ECT, as the annulment of the award would amount to a violation of its right to property under Article 1 of the First Additional Protocol to the ECHR, “both independently and in conjunction with the right to an effective remedy under Article 13 of the ECHR“.
The Court acknowledged that it may only diverge from the CJEU’s interpretation if its application “would constitute a serious and unequivocal violation of an individual’s right” under the ECHR.
However, the Court noted that the Swedish Supreme Court had previously observed that the annulment of an intra-EU award “does not in itself deprive the parties of the right to a judicial review or a fair trial“.
The Svea Court found no reason to depart from this reasoning.
Mercuria was ordered to pay Poland’s costs in the domestic proceeding.
Enforcement of the Award in the United States
Mercuria filed for the enforcement of the award in the United States in November 2023. On 2 January 2025, the US District Court for the District of Columbia stayed the case pending the conclusion of the set-aside proceeding.
Subsequently, the parties submitted a joint motion to resume the proceedings following the Svea Court’s judgment, which was granted by the court in a Minute Order dated 31 January 2025.
CC/Devas v. India (I)
Federal Court of Australia Finds that India Did Not Waive Immunity by Ratifying the New York Convention
PCA Case No. 2013-09
Institution: PCA (Permanent Court of Arbitration)
Tribunal: Marc Lalonde (President), David R. Haigh (Appointed by the claimants), Anil Dev Singh (Appointed by the State)
Seat of arbitration: The Hague, Netherlands
On 31 January, the Federal Court of Australia ruled on India‘s appeal against a judgment that upheld jurisdiction over the state and dismissed its sovereign immunity arguments under the New York Convention (1958) (“NYC“) and the 1985 Australian Foreign States Immunities Act (“FSIA“) in the context of enforcement proceedings of a USD 111 million BIT award.
Background
In a prior judgment in October 2023, Justice Jackman determined that India is not immune from jurisdiction, concluding that there was a clear and unmistakable submission by agreement as defined under section 10(2) of the FSIA. The judge reasoned that India’s signing of the NYC by India constituted a waiver of its immunity from jurisdiction.
India contended that it had signed the NYC with a reservation, namely that its application was limited to “differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the Law of India“, as opposed to disputes concerning the conduct of the state acting in its governmental capacity. However, this argument was rejected by the Jackman J.
In November 2023, India was granted leave to appeal the judgment (See our previous digests here and here).
Federal Court Finds that India Did Not Waive Its Immunity
In its judgment, a three-judge bench considered whether India’s submission to the jurisdiction of the court was limited by its reservation to the application of the NYC.
The Court drew upon the provisions of the Vienna Convention on the Law of Treaties and the ILC’s Guide to Practice on Reservations to Treaties. It established that “the reservation modifies the provision of the treaty to the extent of the reservation for each party reciprocally” and that a valid reservation has the inherent capacity to exclude or modify “the legal effect of certain provisions of the treaty in their application to that State“.
The Court thus concluded that India has no obligation to Australia to enforce the NYC other than in respect of differences arising out of legal relationships which are considered as commercial, “and, critically, vice versa“. The Court considered that even if India’s ratification of the NYC can be considered as a waiver, such a waiver would only apply to awards outside the scope of the reservation.
The Court then proceeded to examine whether the award was commercial in nature. It was noted that, in the proceedings before the primary judge, the investors had “expressly disavowed” that the BIT and the Devas/Antrix Agreement constituted commercial transactions. The Court further observed that the investors were not party to the BIT, that “India’s relationship with the BIT was in the realm of public international law that gave international law rights to private investors in India“, and that the annulment of the Devas/Antrix agreement was for reasons of public policy.The Court held that the award did not arise from a commercial relationship.
In conclusion, the Court set aside the judgment of the primary judge and ordered the investors to pay the costs of the appeal.
9REN Holding v. Spain; NextEra v. Spain; Infrastructure Services (Antin) v. Spain; Cube Infrastructure v. Spain; AES Solar and others (PV Investors) v. Spain; InfraRed v. Spain; Hydro v. Spain ; BayWa v. Spain
An Update on Pending Enforcement Actions Against Spain in US Courts
9REN Holding v. Spain
ICSID Case No. ARB/15/15
Institution: ICSID (International Centre for Settlement of Investment Disputes)
Tribunal: William Ian Corneil Binnie (President), David R. Haigh (Appointed by the claimant), V.V. Veeder (Appointed by the State)
NextEra v. Spain
ICSID Case No. ARB/14/11
Institution: ICSID (International Centre for Settlement of Investment Disputes)
Tribunal: Donald M. McRae (President), L. Yves Fortier (Appointed by the claimants), Laurence Boisson de Chazournes (Appointed by the State)
Infrastructure Services (Antin) v. Spain
ICSID Case No. ARB/13/31
Institution: ICSID (International Centre for Settlement of Investment Disputes)
Tribunal: Eduardo Zuleta Jaramillo (President), Francisco Orrego Vicuña (Appointed by the claimants), J. Christopher Thomas (Appointed by the State)
Cube Infrastructure v. Spain
ICSID Case No. ARB/15/20
Institution: ICSID (International Centre for Settlement of Investment Disputes)
Tribunal: Vaughan Lowe (President), James J. Spigelman (Appointed by the claimants), Christian Tomuschat (Appointed by the State)
AES Solar and others (PV Investors) v. Spain
PCA Case No. 2012-14
Institution: PCA (Permanent Court of Arbitration)
Tribunal: Gabrielle Kaufmann-Kohler (President), Charles N. Brower (Appointed by the claimants), Bernardo Sepúlveda-Amor (Appointed by the State)
Seat of Arbitration: Geneva, Switzerland
InfraRed v. Spain
ICSID Case No. ARB/14/12
Institution: ICSID (International Centre for Settlement of Investment Disputes)
Tribunal: Stephen L. Drymer (President), William W. Park (Appointed by the claimants), Pierre-Marie Dupuy (Appointed by the State)
Hydro v. Spain
ICSID Case No. ARB/15/42
Institution: ICSID (International Centre for Settlement of Investment Disputes)
Tribunal: Lawrence A. Collins (President), Peter J. Rees (Appointed by the claimants), Rolf Knieper (Appointed by the State)
BayWa v. Spain
ICSID Case No. ARB/15/16
Institution: ICSID (International Centre for Settlement of Investment Disputes)
Tribunal: James R. Crawford (President), Horacio A. Grigera Naón (Appointed by the claimant), Loretta Malintoppi (Appointed by the State)
Numerous updates have occurred in the pending enforcement actions against Spain following the US Court of Appeals for the District of Columbia judgments in the NextEra, 9REN, and PV Investors cases.
Background
On 16 August 2024, the US Court of Appeals for the District of Columbia delivered its judgment in the NextEra, 9REN and PV Investors appeals. The Court found that the intra-EU nature of the disputes could not be invoked in support of Spain’s immunity arguments and that district courts have jurisdiction to enforce the awards under the FSIA’s arbitration exception.
Subsequently, on 2 December 2024, the same Court denied Spain’s petition for rehearing en banc.
In the wake of this decision, Spain filed a petition for certiorari before the US Supreme Court and requested a stay of multiple proceedings pending before the US District Court for the District of Columbia.
Contradictory Orders on Stay of Proceedings
On 30 January, Judge Tanya S. Chutkan issued two Minute Orders in which she denied Spain’s motion to stay the NextEra and 9REN cases pending the resolution of its petition for certiorari before the US Supreme Court. Judge Chutkan considered that several factors weigh against granting the stay:
- Spain had already consented to a summary judgment briefing that is ongoing.
- The petition for certiorari does not ensure that the Supreme Court will grant it, especially when the D.C. Circuit unanimously held that the court had jurisdiction to enforce the arbitral award under the FSIA and had denied hearing en banc.
- Spain did not seek stay of the Circuit’s mandate pending its certiorari petition.
- If the stay is granted the investors would risk losing priority of claims.
In two reasoned Orders of 27 January, Judge Loren Alikhan denied Spain’s request for a stay of the Antin and Cube proceedings and lifted the stay in both cases. This decision was consistent with that of Judge Chutkan in NextEra and 9REN. Judge Alikhan explained that when deciding on a stay, the court must “weigh competing interests and maintain an even balance’ between the court’s interests in judicial economy and any possible hardship to the parties“. She then proceeded to consider the various factors that weighed against granting the stay, ultimately determining that:
- With respect to judicial economy, Spain could not demonstrate that the Supreme Court is likely to grant its imminent petitions for certiorari or that it was likely to prevail on the merits in a manner that would divest the court of its jurisdiction.
- Spain did not seek to stay the D.C. Circuit’s mandates pending its petitions for certiorari.
- Spain is unlikely to face hardship in the absence of a stay while the investors were more likely to suffer hardship if the case remains stayed, especially in view of the numerous actions pending against Spain, since this increases the likelihood that other creditors will supersede the investors, threatens their ability to enforce the award, and “compels them to stand aside while a litigant in another case attempts to define the rights of both.”
On 22 January, Judge Richard J. Leon issued a Minute Order staying the PV Investors proceeding. He explained that “the likelihood that respondent [Spain] will prevail on the merits, the potential harm to respondent, and the public interest warrant staying the case”.
On 13 January, in a reasoned Order, Judge John D. Bates denied Spain’s motion to stay the InfraRed proceeding. Similarly to Judges Chutkan and Alikhan, he considered that several factors weighed against Spain’s request:
- Spain had not demonstrated the Supreme Court is likely to grant certiorari.
- Spain had not demonstrated that it would be irreparably harmed by the continuation of the case.
- Granting the stay could harm the investor vis-à-vis other petitioners suing Spain, which could lose priority of its claim, given that there are fifteen enforcement actions pending in the Columbia District Court.
- The public interest weighed in favour of denying the motion because “stays in arbitration enforcement cases are only appropriate if they further the objectives of arbitration, such as speedy resolution”.
On 8 January, in a Minute Order, Judge Richard J. Leon issued a Minute Order granting a stay of the Hydro proceeding. Judge Leon’s reasoning was identical to his reasoning in the PV Investors case.
On 23 December 2024, Judge Amit P. Mehta dismissed Spain’s request to continue the stay of the BayWa case. Judge Mehta considered that:
- Spain had not demonstrated that the Supreme Court is likely to grant certiorari.
- Continuing to postpone resolution of the case would prejudice the investor, which had filed for enforcement over two years ago.
ABOUT THE AUTHOR
Zeyad Abouellail is a Senior Legal Officer at Jus Mundi and a PhD candidate & teaching assistant at Paris-Saclay University. His doctoral research focuses on the post-award phase in investment arbitration, alongside his teaching responsibilities in civil and contract law. Zeyad regularly speaks on the intersection of Artificial Intelligence and law. He holds Master’s Degrees in International Business Law from both Paris-Saclay University and Paris 1 Panthéon-Sorbonne University. Before joining Jus Mundi, Zeyad interned at several law firms in international arbitration and corporate law in Cairo, Egypt.
